This article appeared on RIABiz.com by Lisa Shidler on September 4, 2020.
The Trump administration is “ramrodding” through a fiduciary rule in a matter of weeks that will replace one put together over nearly a decade, says Phyllis Borzi, the former Obama Labor Department assistant secretary.
For eight years, Borzi pushed for a now-defunct DOL fiduciary rule in her role as head of the department’s Employee Benefits Security Administration. The rule was approved in 2016 and vacated in 2018 by the U.S. Court of Appeals for the 5th Circuit.
Borzi said during a DOL Fiduciary Convention panel discussion she was irked by a public comment period of just 30 days–and DOL’s denial of an extension. The Labor Department introduced its rule in July. See: New DOL fiduciary ‘rule’ unshackles broker-dealers to pursue commissions, declaring brokers ERISA fiduciaries by making simple disclosures.
“Watching the process like this where things are ramrodded through without much attention. It’s sort of hypocritical. It’s like they think they can wave a magic wand and re-do everything without substantial public input,” she said.
She also spoke at a press conference as part of the Institute for Fiduciary Standard’s meeting. The non-profit research organization held a day-long hearing on the DOL’s proposed rule.
The new rule would allow advisors to receive third-party income from such sources as commissions, 12(b)1 fees and revenue sharing while still declaring themselves fiduciaries.
In contrast, the rule Borzi helped engineer banned compensation in most cases. It also required advisors to manage retirement accounts as fiduciaries and pledge to act in a clients’ best interests.
Borzi is no longer in her role at the DOL, but her message isn’t any less important, says Knut Rostad, co-founder of the Committee for the Fiduciary Standard and co-founder and president of the Institute.
“Phyllis Borzi is the godmother of ERISA in the 21st century. Her years in the field, institutional knowledge and political prowess are unsurpassed,” he says.
And, she’s not the only one who is convinced the Trump administration rushed through the rule.
The rule should have had a 60-day comment period rather than a 30-day period, agrees Fred Reish, an ERISA attorney and partner with Faegre Drinker Biddle LLC in Los Angeles. See: Despite just a 30-day window, 8,700 people comment — most with scathing disapproval — on DOL’s efforts to outlaw ESG in 401(k) plans on behalf of mystery proponents
“It would have been better if the DOL had allowed a full 60-day comment period, as well as the opportunity for people to meet with them to discuss the issues. There are some issues and nuances that can be better communicated in conversations than through written comments,” he says.
Borzi is most troubled that the administration didn’t follow its own guidelines allowing public comment.
“I’m extremely disappointed and frustrated that they don’t seem to be willing to follow the congressionally mandated rules for making these kinds of substantive changes,” she said.
“I get that they don’t have the same priorities but at least let the process be fair and take the public comment.”
Read the full article on RIABiz.com.